MR. DAVID GREGORY: Our issues this Sunday: She has been a member of President Bush’s inner circle from the very beginning—first as national security adviser, now as secretary of state. As she prepares to leave her post, we look ahead to the challenges that await her successor and back at her eight years in the Bush administration. Our exclusive guest, Secretary of State Condoleezza Rice.

Then, embattled governor Rod Blagojevich remains resolute.

(Videotape)

GOV. ROD BLAGOJEVICH: I will fight, I will fight, I will fight until I take my last breath. I have done nothing wrong. I’m not going to do what my accusers and political enemies have been doing, and that is talk about this case in 30-second sound bites on MEET THE PRESS or on the TV news.

(End videotape)

MR. GREGORY: And so the political drama continues as the president-elect prepares to release additional information on internal contacts with the governor’s office.

Plus, automakers finally get a helping hand from Washington. And what are the prospects for a Senator Caroline Kennedy? Insights and analysis from our political roundtable: Erin Burnett, anchor of CNBC’s “Street Signs” and co-anchor of CNBC’s “Squawk on the Street”; Carol Marin, political columnist for the Chicago Sun-Times and political editor of NBC 5 WMAQ-TV Chicago; Andrea Mitchell, chief foreign affairs correspondent for NBC News; and Michele Norris, host of NPR’s “All Things Considered.”

But first, we welcome back the secretary of state, Condoleezza Rice, for her 20th appearance on this program over the past eight years.

Thank you for being willing to come on the program and explain your views all these times.

SEC’Y CONDOLEEZZA RICE: It’s a pleasure to be with you, David. And congratulations on...

I wanted to back to the beginning of this administration’s foreign policy, and we took a look at the presidential debate back in October of 2000. Then Governor Bush was asked how people of the world should look at the United States, and here’s what he had to say.

MR. GREGORY: Eight years later, seven years later after that, do you think that the world views the United States as a humble nation?

SEC’Y RICE: I certainly think the United States views the—that the world views the United States as a place to be respected. All over the world, David, our values are respected; who we are, a place that you can come and come from modest circumstances to great things, that’s respected. What we’ve done hasn’t always been liked or popular. But if you look at some of the most populous places in the world—China, India—the United States is not only respected but, in fact, popular. So yes, there are some places that have had real quarrels with our policies, but, but I think the United States is very well-respected worldwide.

MR. GREGORY: A lot changed, obviously, after that debate, 9/11, principally. But even on the course of that, do you think that the president pursued a humble foreign policy as he, as he said he would, as he said it was important for the United States to?

SEC’Y RICE: Well, I think it’s very humble to believe that there is no man, woman or child who should live in tyranny. That people who say, well, maybe Arabs just aren’t ready for democracy or maybe Africans just are going to have corrupt governments, that seems to me arrogant.

SEC’Y RICE: To say that those people deserve the same, the same life that we have, the same freedoms that we have, that seems to me, humble. I think it’s humble to say that the United States, which has been given so much, should give back and to launch the largest health program in history, the president’s emergency plan for AIDS relief, or to quadruple foreign assistance to Africa, or to double it to Latin America. I think these are the hallmarks of humble policy, but popular? Not always.

MR. GREGORY: What have you learned in the course of your time, both as national security adviser and now secretary of state, about the limits of America’s power, Both militarily and diplomatically?

SEC’Y RICE: Well, America cannot do most of what needs to be done alone. You need friends. And we have good friends around the world. We have friends with whom we share values in Europe and Asia—thanks to the forward march of democracy—in Latin America, in Africa, and increasingly in the Middle East. But multilateral diplomacy is hard. It’s slower, it’s tougher, it’s a bigger slog. I’ve learned, too, that sometimes the things you’d most like to do something about, you really have difficulty unless the international community really mobilizes. David, one of the real regrets I’ve had is that we haven’t been able to do something about Sudan.

MR. GREGORY: Mm-hmm.

SEC’Y RICE: And we’ve tried to ameliorate the humanitarian...

MR. GREGORY: Genocide in Darfur.

SEC’Y RICE: Right. Exactly. The horrible lives that the people of Darfur are living, the horrible tragedy that is unfolding there. Now, it’s true, we’ve been able to do a lot about the humanitarian situation. We’ve even been able to support getting some peacekeepers onto the ground; and where there are peacekeepers, there’s less violence. But we could’ve done so much more had there...

MR. GREGORY: Why didn’t we act unilaterally?

SEC’Y RICE: Well, because acting unilaterally in an Arab country or in a Muslim country that is that complex, that far away, really did not seem to be an option. The president considered it. He thought about it. He thought about what we could do unilaterally. But in fact, instead, we’ve tried to mobilize the international community and international opinion. And frankly, given that, just a couple of years ago at the UN, the leaders of the world stood up and said, “We have a responsibility to protect, if a government will not protect its own people.” And then we’ve had trouble getting anybody to do anything about it.

SEC’Y RICE: The United States has, by the way, imposed unilateral sanctions in Sudan. We have been the country that’s been the most active in resisting calls to interfere with the international criminal court investigation of the leadership there, despite the fact that we’re not members of the international court. So I think we’ve done a lot unilaterally, but we could’ve done a lot more if the international community were better mobilized.

MR. GREGORY: Isn’t it amazing, the last 16 years of American leadership, two presidents, two big regrets stand out: Rwanda and Darfur.

SEC’Y RICE: Yes.

MR. GREGORY: The failure to prevent and protect innocent people from genocide.

SEC’Y RICE: Right. Yes. Although I will say that we’ve also been engaged in activities that have protected innocent people. Look at Saddam Hussein’s record of, really, genocide inside of Iraq, what he did to Shia populations, to Kurdish populations, actually using weapons of mass destruction. Look at what the Taliban did to populations in Afghanistan. And so, in those circumstances, where the marriage of our values and our security interests has put us forward in a more active military way, we have tried to protect innocent people. But yes, it’s, it’s really not a very good sign for the international community, and it does not reflect well on the Security Council that Darfur has...

MR. GREGORY: And that all of this happened on the continent of Africa, whether it’s...

SEC’Y RICE: Well, and that it all happened on the continent of Africa. I was just at the UN last week. We talked about Zimbabwe.

MR. GREGORY: Mm-hmm.

SEC’Y RICE: This is another circumstance in which the international community, most of it, including, by way—by the way, several African states—Botswana, the leadership of Kenya, and others—are saying that the regime of Robert Mugabe has got to go.

MR. GREGORY: Mm-hmm.

SEC’Y RICE: You’ve got a cholera epidemic there. You have humanitarian disaster in terms of food. You have the goons of the Mugabe regime going around and, and detaining people and, and frightening people, terrorizing people. again, the international community, in that circumstance, needs to act.

MR. GREGORY: Let, let’s talk about Iraq. The president’s final visit there as president happening just a week ago today, and what became, obviously, the most noticed image of that, that trip was this press conference with the prime minister and a member of the press throwing his shoes. As the president pointed out, as you’ve pointed out, certainly a sign of freedom in Iraq.

SEC’Y RICE: Yes.

MR. GREGORY: You got a press corps that can speak its mind and act the way it wants to act. I think other people will look at that and say members of this administration said that America would be greeted as liberators in this country. That was certainly not the case. And now we have, even in a period of, of relative stability in Iraq, you have this kind of iconic image like this. Do you see it differently?

SEC’Y RICE: I see it very differently. First of all, David, if ever there is a clear reason that history’s judgment and today’s headlines are, are different is that the focus on something like this when, in fact, the president was standing next to a democratically-elected prime minister of Iraq who is himself a Shia and at the lead—the head of a multiethnic, multiconfessional democracy in the heart of the Middle East that has just signed a path-breaking strategic forces agreement and Strategic Framework Agreement with the United States, that’s the headline. That someone chose to throw a shoe at the president is what gets reported over and over? I think that’s why history always shows these things differently than, than today’s news.

MR. GREGORY: Let’s talk about the reflections about the Iraq war. And you had some conversations, as did others in the administration, with Bob Woodward for his latest book, “The War Within.” This is what you had to say, in part: “There is nothing that I’m prouder of than the liberation of Iraq. ... Did we screw up parts of it? Sure. ...a lot of it wasn’t handled very well. ... There are a lot of things if I could go back and do them differently, I would. But the one thing I would not do differently is, we should have liberated Iraq. I’d do it a thousand times again. I’d do it a thousand times again.” You remain resolute. And yet, in our most recent NBC News/Wall Street Journal poll, people cite Iraq as the biggest failure of the Bush presidency. How do you reconcile those two things?

SEC’Y RICE: I believe that this is one of those long stories in history, not a short one. And you look at what’s happened in Iraq, David, you have to look at the effect of a different Iraq on the Middle East, the place from which the 9/11 hijackers came. Not Iraq, but the Middle East. The heart of the middle—the heart of al-Qaeda is the Middle East. And you look at the Iraq that was there prior to the American liberation, it was Saddam Hussein who had dragged the region into war several times, had dragged us into war, had used weapons of mass destruction, continued to seek them, who was an implacable enemy of the United States. He put 300,000 of his own people in mass graves, and who was a danger to his people, his neighbors and to us.

Now you have in Iraq, after very difficult circumstances and a difficult journey—and let me say right now, lives lost that will never be brought back and a road harder than I would have ever thought. But at that—at the end of that road is an Iraq that is a multiconfessional, multiethnic democracy that will not seek weapons of mass destruction, that will be at peace with its neighbors, that is being reintegrated into the Arab world with the Egyptian foreign minister having gone there for the first time in 30 years. I went to Kuwait, I saw the Iraqi flag fly voluntarily in Kuwait. This Iraq, at the center of the Middle East, a powerful Arab state that is a friend of the United States and democratic, is going to make the Middle East a fundamentally different place.

MR. GREGORY: Do you believe that over time, then, the United States will emerge with what will be considered an unambiguous victory in Iraq?

SEC’Y RICE: I believe that it will be, as time goes forward, absolutely clear that Saddam Hussein’s Iraq would never have allowed the Middle East to change, and that this Iraq has the potential to anchor a more democrat, a more prosperous, a more peaceful Middle East, and, by the one, one that—by the way, one that is friendly to the United States.

MR. GREGORY: But it’s a slightly different issue. Have we won the war in Iraq?

SEC’Y RICE: We’re—I think we’re well on the way to winning it. Iraqis are on the way to winning it. It’s, it’s not just what we’ve done. It’s that the Iraqi security forces were able to defeat the special groups and the Iranian-backed militia in Basra in the south.

SEC’Y RICE: It’s the Iraqi security forces that are taking the lead in numerous provinces now as we’ve been able to step back to what the military calls a kind of “overwatch” position. It’s the Iraqis who have gone to their parliament and been able to pass an elections law and pass an—a, a law that brings more and more people into the political system. And it’s the Iraqis that have been able, despite enormous pressure from Iran, to sign with us a Status of Forces Agreement and a Strategic Framework Agreement that lays out a long-term relationship between the United States and Iraq.

MR. GREGORY: The next administration and others will, will want to examine what went wrong internally in the lead-up to the war. And again, Bob Woodward in his latest book has written about some of the disagreements in the—even in the run-up to the surge. And he wrote this on the issue of complaints, talking about you: “[Condoleezza Rice] never brought her complaints directly to the president for two reasons. First, she was an optimist, as was the president. ‘Everyone has a tendency toward optimism,’ she said. In fact, the president almost demanded optimism. He didn’t like pessimism, hand-wringing or doubt. Second, Rice claimed that as secretary of state she didn’t feel it was appropriate to criticize” then Secretary of Defense Rumsfeld or General Casey, who, of course, oversaw U.S. troops in Iraq, “to the president.” What you’re describing here, what Bob Woodward is describing talking to you, was a certain amount of pressure about what to bring to the president. Did, did that make it hard for you, some of the things that he demanded?

SEC’Y RICE: Oh, let me, let me put that in my own words.

MR. GREGORY: OK.

SEC’Y RICE: Because the only thing that’s a quote there is that the president demanded optimism. And the president did demand that we all remain focused on the goal, and that we not give way every day to the kind of pessimism that keeps you from dealing with the problems that you face. But the, the president never demanded, nor did I give him a ban on bad news or a ban on criticism. I would go to the president frequently and say, “Mr. President, this isn’t working” or “that isn’t working.” I came back from Iraq in October 2006, and I told him, I said, “Mr. President, the fabric of this society is rending.” And I had had a conversation with each of the Iraqi leaders, and I told them, I said, “The way that you’re behaving now, this sectarian behavior, you’re going to all be swinging from lampposts in six months.” I told the president that. So I was not afraid to give the president bad news. But when you, on a daily basis, give in to pessimism or hand-wringing, you’re simply not going to face the problems and, and try to deal with them.

MR. GREGORY: So, as you look forward, though, as you were giving your successor advice, where is that line between if you want to—you’re serving a president who does demand optimism, who doesn’t want hand-wringing, between that and, “Look, Mr. President, you’ve got to realize you can’t be stubborn about this, we have to change course.” Where’s the line?

SEC’Y RICE: And it’s not—first of all, it’s not stubbornness. The president himself said many, many times—I remember shortly before the surge, someone was asking him about the polls about Iraq and he said, “Count me among those who are not satisfied on Iraq.” So this president wasn’t wearing rose-colored glasses. He did believe that if we “righted the ship,” in a sense, that our values were going to triumph because he believes very strongly in the force of freedom.

But, you know, in those difficult days, David, I would always remind myself not that we—that I needed to take good news to the president, but that I needed to take him my honest assessment of what I thought was going on and what we could do about it. I do realize in history’s great sweep, though, that when you look at, for instance, where we—I was when I came here the last time to participate in the unification of Germany and the liberation of Eastern Europe and the collapse of the Soviet Union, that in 1947 or 1948, if you had said that that was going to be the outcome 50 years later, someone would have had you committed. And therefore I do recognize that history’s long arc is different than the—today’s headlines.

You do have to keep in mind as you’re going through extraordinarily difficult circumstances, that if you stay true, true to your values, if you stay true to your principles, if you believe in these values, then you can work in that context to right policies that may not be working. And this president, against a lot of odds, went with a surge of our forces. Not just a surge of our forces, a surge of our civilian presence. The State Department put officers—diplomats and aide workers—in the field in tough places like Anbar and hard cities of Sadr City and in, in the south. That kind of effort doesn’t come from a rose-colored view that somehow everything is going right, but it does come from the belief that Iraq was too important to lose.

MR. GREGORY: Let me talk about your successor a little bit, Hillary Clinton, and the news this week that her husband, the former president, released contributors to his global initiative, to his foundation. A lot of questions about how that’s going to be managed if he still has a big role around the world. In effect, if she’s secretary of state with a former president as a husband, is foreign policy going to have two for one?

SEC’Y RICE: Well, look, it’s a unique situation. I think we all think it’s unique. But my successor, Hillary Clinton, is an extremely talented woman. She is a, a woman of integrity. She believes in this country deeply. We’ve already had a couple of conversations. I know her from the time she brought her freshman daughter to Stanford for the first time when I was provost, and she’s going to do this very well.

MR. GREGORY: So you don’t think the former president’s profile on the world stage will be a problem?

SEC’Y RICE: I, I also know the, the former President Clinton, and I have to say right here, he has always been respectful of our role, of the president, of me. He’s been helpful, and I’m sure they’ll work it out. And it’s up to them and President Obama as to how that goes.

MR. GREGORY: Who better to span the world with here in our remaining time, and I’d like to hopscotch around the globe a little bit, to talk about some of the challenges that this new president’s going to face. Let’s talk about North Korea. A lot of the headlines this week about those talks breaking down in order to get the North Koreans to really back off the pursuit of a nuclear program. The Wall Street Journal was critical, in an editorial this week, of your approach on all this, writing the following: “The North has never kept a commitment, verbal or written. Its negotiating habit is to make promises to win concessions, then renege on those promises and saber-rattle until the U.S. offers further concessions. ...

“Ms. Rice recently said the only alternative to her Pyongyang policy was short-term ‘regime change,’ which is a classic false dilemma. Her failure—and Mr. Bush’s—was putting the appearance of diplomatic progress above genuine disarmament.” You actually joked this week during a—an appearance at the foreign—at the Council on Foreign Relations that nobody was trusting of the North Koreans, that you’d have to be an idiot to trust the North Koreans.

SEC’Y RICE: Right.

MR. GREGORY: And yet that’s the criticism, that this administration did trust too much.

SEC’Y RICE: No. Of course we didn’t trust them. What we are negotiating is a verification protocol because nobody does trust them. And, in fact, if you look at the agreement that was signed in September of 2005, it committed the North to denuclearization within a context of the six parties. That means Russia, China, Japan and South Korea are all at the table to ensure that these, these commitments are met. Now, step by step, we’ve been going through those commitments, and we have been responding to meet our obligations when the North goes forward with its obligations. So when they shut down the reactor, we met some of our small obligations in terms of fuel oil delivery. And they did shut down the reactor. There hasn’t been any more plutonium made since September of 2005. Now when they, as the North is wont to do, when they tested a missile in July of 2006 and in October of 2006 set off a crude nuclear device, we went back to the other five. I was on the phone with them, David, within hours; and by the end of the week, we had a Chapter 7 Security Council resolution, sanctions and constraints on the North Koreans, signed on by the Chinese. That’s extraordinary.

Then, after that, when the North came back and said, “All right, we’re ready to disable our reactor. It’s now shut down. We’re going to start to disable it,” we agreed disabling plus a declaration from them about their further nuclear programs and then more assistance from us and they did begin to disable. They did blow up the cooling tower. They did really disable certain elements of their nuclear system on the plutonium side, and we delivered.

SEC’Y RICE: And we have about 80 percent of the verification protocol agreed with the North. Things like interviews with scientists, the right to go and ask questions and probe concerning various facilities, the right to look at operations records, to look at production records. We have 18,000 documents in our possession. What the North wouldn’t do is go the last 20 percent, which is to clarify some of the elements of scientific procedures that might be used to sample the soil. So a lot has been achieved here. I think more will be achieved, but it’s really only going to be achieved in the context of the six parties, because if you don’t have China and South Korea and Russia and Japan at the table, too, then the North can play the game that they used to play of getting benefits from other parts of the international community and refusing to carry forward on its obligations.

MR. GREGORY: Really quickly, let me try to get to Iran as well. The president said in a course of, of his tenure, he would not tolerate a nuclear Iran. The reality is that, when you came into office, Iran was in something of a box. You leave office, Iran is resurgent. Outsized influence in Iraq, outsized influence elsewhere in the Middle East, including in the West Bank and with groups like Hamas, scuttling efforts between the Israelis and the Palestinians. This is not a reality that you anticipated or wanted.

SEC’Y RICE: You know, actually, David, I’d, I’d put it very differently. When we came into office, apparently no one believed that Iran really wanted to seek a nuclear weapon. And so there wasn’t an international coalition that had voted for Security Council resolutions demanding that the Iranians stop reprocessing and enrichment. There wasn’t an international community that has pulled out of Iran because of, in terms of investment, because of the risk and because of reputational risks.

MR. GREGORY: Mm-hmm.

SEC’Y RICE: There wasn’t an international community that was standing firm, as the Gulf Corporation Council that the Arab states did the other day in a meeting with the so-called “P5 plus 1,” the states that are negotiating with Iran, to say, “We demand that you deal both with Iran’s hegemonistic behavior and with their nuclear program.”

Finally, let me just say a word about, about Iran and Iraq. Yes, Iran will have influence. They’re a neighbor. But Iran was unable to stop this SOFA from going forward, and they pulled out all the stops. That shows...

MR. GREGORY: The agreement for with—to withdraw from Iraq.

SEC’Y RICE: The agreement with the United States. This shows that the Iraqis are going to be independent, they are going to defend their interests, and they are going to be a bulwark against undue Iranian influence in the region.

MR. GREGORY: I want to ask you about this moment politically in our country. I know the president spoke to you on election night when the president-elect was elected and when there was this outpouring of emotion in Grant Park and, frankly, across the country.

SEC’Y RICE: Yeah.

MR. GREGORY: What did you feel that night, and what did you share with him about the importance of that moment?

SEC’Y RICE: Well, we saw it similarly, interestingly. For me, of course, as an African-American, it’s extraordinary. I was born in segregated Birmingham, Alabama. I didn’t have a white classmate till we moved to Denver. And to see an African-American elected president means that this country is really finally coming full circle from the birth defect of slavery. I’m proud to, to think that President Bush appointed back to back African-American secretaries of state. That was extraordinary. And so we’ve been on this journey. But what happened on that night was really quite something. And I also know the president-elect. He was on my committee, the committee on—the Senate Foreign Relations Committee, and he’s a quite extraordinary man. But an incredible day for America.

MR. GREGORY: I know you’re a proud Republican, but were you rooting for Barack Obama?

SEC’Y RICE: Now, David, you know I’m secretary of state, so I don’t talk about my, my partisan or nonpartisan beliefs. But I think every American was rooting for the kind of election that we had. One in which, when it was over, the, the defeated candidate, John McCain, gave one of the most exceptional concession speeches. One in which we showed that this country does this better than any country in the world. One in which we’re making a completely smooth transition because President Bush wants it to be that way with our country in a time of war and a, a time of economic difficulty.

What I’ve heard around the world is, yes, there’s, there’s great, great joy that a, a, a minority, an African-American’s been elected. But there’s also just great admiration and almost a sense that it’s quite remarkable that America does what it does this way.

MR. GREGORY: What’s next for Condoleezza Rice?

SEC’Y RICE: Well, I’ll go back west of the Mississippi, where I belong, to California. And I’m going to go back to Stanford and the Hoover Institution. I want to write a book. Obviously, I’ll write a book on foreign policy. It’s been an incredible time, and I think we’ve left a lot of places in much better shape. And I, I want to write about the post-9/11 end of our innocence in foreign policy.

I also want to write a book about my parents. My parents were incredible. You know, they, they probably never made more than $60,000 between then. They were, my father, a high school guidance counselor, later university administrator, my mother a teacher. But they recognized the value of education and they did everything they could to make sure I had every opportunity and made enormous sacrifices. And I want that to be known.

But most importantly, as secretary of state—and it’s been an enormous honor to represent this great country that I love so much—I have really seen that our great strengths are in the ability of people to reach their potential here, whether immigrants come here and reach their potential, or whether we continue to believe, as Americans do, that it doesn’t matter where you came from, it matters where you’re going. We can’t live true to that set of values unless our educational system is strong. And so, as early as 1992, David, I got involved in K-12 educational issues for underprivileged kids. I really believe that if we don’t get that right we will not compete because we won’t believe that our people can compete, and we’ll turn inward. We won’t lead. That will be bad for the world.

But most importantly, in a multiethnic democracy, where we’re not bound by blood, we’re not bound by religion, we’re not bound by nationality, we’re bound by an idea. And that idea is that every American can come from humble circumstances and do great things. And, as an educator and secretary of state, I want to go make sure that’s true.

MR. GREGORY: And thank you for being here, and thank you for your public service.

SEC’Y RICE: Thank you very much, David.

MR. GREGORY: Thank you.

Coming next, automakers finally get some help from Washington, the political drama continues to unfold in Illinois, and just 30 days until the inauguration of the president of the United States, Barack Obama. Our political roundtable weighs in. Erin Burnett, Carol Marin, Andrea Mitchell and Michele Norris—all here only on MEET THE PRESS.

MR. GREGORY: Our political roundtable on a busy week in politics right after this brief station break.

(Announcements)

MR. GREGORY: We’re back and joined by Michele Norris of NPR, Erin Burnett of CNBC and Carol Marin of the Chicago Sun-Times and Andrea Mitchell of NBC News.

Welcome to all of you. Carol, of course, also with our affiliate in Chicago, WMAQ. So good to have you all here. We have a lot to get to here.

Erin, I want to start with you. The headline in The New York Times yesterday on this auto bailout was this, “Bush Aids Detroit, But Hard Choices Wait For Obama.” What are they?

MS. ERIN BURNETT: A couple of very big choices for Obama. As we all know, they’ve got this loan, but he can change the terms, and there is something big in there about labor. It says, guess what, U.S. automakers, you have to get your costs down to the same as the foreign automakers by the end of 2009. Labor doesn’t want that, they want that taken out. Barack Obama is going to have to decide whether he wants to take a stand against big labor. He’s made a point of saying, “Look, labor, I’m not going to go against you. Labor shouldn’t take the burden.” But if he actually stands up to them, that would be significant. And I think that’s the biggest thing in there for him.

MR. GREGORY: We’ve seen so much activity with the Fed cutting interest rates now to historic lows here to try to encourage people to buy homes. At the same time, Michele, the stimulus package takes shape and gets bigger even before he gets to office. It’s now approaching $850 billion. Now the goal of, of producing close to three million jobs. They’re worried about unemployment.

MS. MICHELE NORRIS: They’re very worried about unemployment. And that stimulus package could actually get even bigger over time. I mean, this is a, this is their, their—they’re putting a lot of stock in this, this infrastructure plan. And that’s the plan to create jobs, to build roads and bridges and schools and hospitals to try to keep that jobs number down. I mean, we’re looking at the possibility of 10 million jobs lost over the next year. I mean, this is a big problem for them.

But to just speak to something that Erin said about the auto bailout. I mean, this is—he will have to determine what it means to be “economically viable.” That’s a lot of power for this president. Is it based on the business model? And in doing that, he’s got to make sure that places like Detroit and Ohio feel whole in this, because they’re looking toward 2012 also. And for communities whose identity and pride is wrapped up in the auto industry, there’s a lot at stake in this.

MR. GREGORY: We’re talking about March 31st of 2009. That’s that deadline for the companies to demonstrate that they have profitability going forward, which will be...

MS. BURNETT: Right.

MR. GREGORY: ...a tall order.

One, one more question about what the Fed is doing, what’s called quantitative easing, where they’re basically buying up...

MS. BURNETT: Right.

MR. GREGORY: ...all of this debt in the hopes of incentivizing people to go out and buy homes. Is that enough? Is it going to work?

MS. BURNETT: That’s—look, in a short answer, probably not completely. They’ve only just started to do some of those things where they’re buying mortgages and they’re buying everything they can buy, but we really are starting to get to a point where we have to have a very serious conversation. All the stimulus, this spending on roads...

MR. GREGORY: Right.

MS. BURNETT: ...we’re spending on this, we’re spending on that. But if you’re not attacking the core problem, which is the people’s number one asset, their home, is dropping in value, it doesn’t matter how many roads you build, you’re not going to have an economy that’s strong on the other side of it.

MR. GREGORY: Let’s turn to politics and Illinois. Carol Marin, this is remarkable. So the governor, Blagojevich, Rob Blagojevich, facing criminal charges. Has not been formally charged, there’s no indictment yet...

MS. CAROL MARIN: Right.

MR. GREGORY: ...which may explain why he’s coming out publicly. He’s got that room to maneuver. He came out Friday and this is what he had to say.

(Videotape)

GOV. BLAGOJEVICH: Now, I’m dying to answer these charges. I am dying to show you how innocent I am.

Now, I know there are some powerful forces arrayed against me. It’s kind of lonely right now. But I have on my side the most powerful ally there is, and it’s the truth.

MR. GREGORY: You have covered politics in Illinois for a long time. What is he up to?

MS. MARIN: He believes what he says. And you know, he loves to fight. This is the son of a steelworker, his mother was a CTA ticket taker. He loves the combat of it. And in his universe he believes what he’s saying. You know, he quotes Churchill, he quotes Willie Nelson, he quotes Hank Williams, he quotes Rudyard Kipling, and he believes. He believes.

MR. GREGORY: And he sounds like he is preparing for an indictment, because he talked about answering the charges in a court of law. He’s certainly got a defense team that’s prepared to go to court.

MS. MARIN: Well, and the U.S. attorney, in declaring these charges, started the clock.

MR. GREGORY: Right.

MS. MARIN: Because when you formally charge, but you don’t yet indict, you’ve got 30 days, maybe another 30 days to bring it to indictment. So he is certainly going to be indicted.

MR. GREGORY: And, Andrea Mitchell, this was Blagojevich’s lawyer, one of his lawyers, Sam Adam, talking about the question of whether he would resign and what would actually be a trigger for that. Let’s watch.

(Videotape)

MR. SAM ADAM JR.: If it doesn’t work, if it is too hard, if the people of Illinois suffer, he will step aside. If that happens, if the people of Illinois are suffering. If he—if we cannot govern, he’ll do that. But I know this governor, and he has worked his entire career fighting for those that are poor, those are disenfranchised. And if he thinks he’s hurting them, he’ll do whatever it takes to make sure they get good governance.

MS. ANDREA MITCHELL: Well, his critics clearly say that he’s already hurting the people of Illinois. Look, Illinois is not going to have a senator. There’s no question that when Congress reconvenes January 5th, January 6th, there won’t be a senator from Illinois when all of these decisions are being made which affect critical issues that, you know, Erin and Michele have talked about, about the jobs being lost in the auto industry, which of course, affects Illinois as well. Not only the suppliers, but the auto industry in Illinois. So this is already affecting Illinois, but I cannot imagine a circumstance short of indictment where he is going to define himself—and I think, Carol, you would agree with that—as having hurt the people of Illinois.

MR. GREGORY: Mm-hmm.

MS. MITCHELL: He is going to fight this through. And, as you have just, you know, discussed, he defines his role very differently than the rest of the political world.

MR. GREGORY: Right. And he says he’s done nothing wrong. And what, what supporters would say is that what we’re hearing on the tapes, the “best of,” there’s a lot of talk, but nothing that’s provable in terms of action, as far as we know.

MS. MARIN: But dial back. This is a 76-page criminal complaint.

MR. GREGORY: Right.

MS. MARIN: It dials all the way back to five years worth of federal investigations...

MR. GREGORY: Right.

MS. MARIN: ...that have already grabbed 13 people, either in indictment or in conviction. The irony and the craziness is he still could appoint a U.S. senator. And Mayor Daley just yesterday...

MS. MARIN: ...suggested—and maybe I’m hearing echoes here—he said, you know, he doesn’t want a special election, he believes there could be a person of impeccable character, a businessman. I’m thinking, does that sound like Bill Daley, former, former commerce secretary?

MS. MITCHELL: Commerce secretary.

MS. MARIN: And Obama, you know?

MS. MITCHELL: Yeah.

MR. GREGORY: Let’s talk about the impact on Obama. So he was asked this week about, you know, when is he going to reveal what contacts he’s had. We know that his chief of staff, Rahm Emanuel, did talk to the governor’s office, which on its face would not be unusual. Here’s what the president-elect was asked and what he said this week.

(Videotape, Wednesday):

MS. CYNTHIA BOWERS: You ran on a platform of transparency.

PRES.-ELECT BARACK OBAMA: Yes.

Ms. BOWERS: How difficult is all this having to wait to release your inquiry business when the American people expect transparency?

PRES.-ELECT OBAMA: Well, it, it’s a little bit frustrating. You know, there’s been a lot of speculation in the press that I would love to correct immediately. We are biding by the request of the U.S. attorney’s office, but it’s not going to be that long. By next week, you guys will have the answers to all your questions.

MR. GREGORY: While he’s in Hawaii, probably put out a piece of paper showing what the contacts were.

MS. MITCHELL: Right.

MR. GREGORY: Is there some exposure here, politically, for Obama?

MS. NORRIS: It’s been—it’s a difficult situation for them having been made by the Obama team in part because, at the outset, when he said, “My team had no inappropriate contact,” it may have been better to say, “Of course we were speaking to the governor.”

MR. GREGORY: Mm-hmm.

MS. NORRIS: “Of course someone was speaking to the governor” because it would be unusual, very unusual if someone on that team, Rahm Emanuel sits on the Senate seat that was once held by Rod Blagojevich. So they said that there’s no inappropriate contact. What people heard there is “no contact.”

MR. GREGORY: Right.

MS. NORRIS: The Obamas have done—the Obama team, as far as we know, has done nothing wrong, but it’s a question of perception. And then by backtrailing, by—in that document it becomes clear and looking at the tapes it becomes clear that Rahm Emanuel is cited on the tapes 21 times, then it makes it look like there’s some discrepancy. When from the start...

MR. GREGORY: Or is there a discussion or a debate, in other words, if there’s a discussion which says here’s a list of acceptable candidates, that’s one thing. If there’s a back and forth about any one of these candidates, that’s something else.

MS. MITCHELL: Right. And there’s a suggestion now, Willie Brown, who talked to the governor, he’s suggesting that it could be that they were, that he was initially proposing Lisa Madigan, the attorney general in Illinois, a potential future competitor...

MR. GREGORY: Right. This is a former mayor of San Francisco and head of the Assembly suggesting this.

MS. MITCHELL: ...and suggesting that it could be that they were discussing with the Obama team Lisa Madigan.

MR. GREGORY: Yeah.

MS. MITCHELL: And that was one possibility that was not acceptable. I think 21 contacts between the governor and Rahm Emanuel would not be surprising.

MR. GREGORY: Right.

MS. MITCHELL: They’re in a transition, and they’re going back and forth. But the question will be how will those transcripts be interpreted? And the other factor is that the U.S. attorney was not prepared to go public with this, but had to. His hand was forced by the Chicago Tribune, which was about to publish. So his case was not ripe, and he probably or possibly does not a prosecutable case on these issues...

MS. NORRIS: I mean, one thing that the Obama camp may be helped by is the campaign that he ran, which was really about a new style of governance.

MR. GREGORY: Mm-hmm.

MS. NORRIS: And he’s helped quite a bit by all of those statements that he made on the stump.

MS. MARIN: But he’s an incremental pragmatist to the sense that whether it’s Rezko or Jeremiah Wright, he releases a little and then releases more, and, as the questions rise, he releases even more still.

MS. NORRIS: Mm-hmm.

MR. GREGORY: And is that consistent with his, with his promise as a candidate for transparency...

MS. MARIN: Right?

MR. GREGORY: ...is the question.

I want to move on to Caroline Kennedy, another very interesting story politically this week. Reporters saw her, the public saw her beginning to campaign in upstate New York, getting into an SUV there, and not having a lot of contact with reporters. She was also at—in Harlem with the famous Sylvia’s Restaurant, with Al Sharpton, meeting with political figures around the state. And she answered questions, Andrea Mitchell, in a rather unorthodox way, written questions submitted by several news organizations that were answered by her spokesman. The Politico reported it this way, I’ll give you some examples. “A Kennedy spokesman drafted seven written answers to eight questions submitted by Politico to the 51-year-old attorney, author and electoral novice.” Here’s an example. “Question three: What priorities would you set for restructuring New York’s financial services industry?” “At this time, Caroline does not have a specific plan to fix New York’s financial services industry. But, if selected, she will work with President-elect Obama, Senator Chuck Schumer and Senator Chris Dodd to pass laws that protect investors and working families across New York and the country.”

“Question 8: Do you think Israel should negotiate with Hamas? Do you agree with Israel’s Gaza Strip embargo? Would you support an Israeli airstrike on Iran if they felt Tehran’s nuclear program represented a threat to their survival?” “Answer: Caroline Kennedy strongly supports a safe and secure Israel. She believes Israel’s security decisions should be left to Israel.”

MS. MITCHELL: First of all, third person in, in these sort of anodyne answers? And one really big pitfall for her in these answers that she gave, and a very smart question from Politico, was, “Would you support the Democratic nominee for mayor?”

MR. GREGORY: Hm.

MS. MITCHELL: And she demurred on that.

MR. GREGORY: Of course, Mayor Bloomberg’s been a big supporter of hers.

MS. MITCHELL: Mayor Bloomberg is a big, you know, private adviser. Kevin Sheekey, his key political strategist, has been helping her. And so she’s not about to say that she would go up against Mayor Bloomberg, who is not a Democrat, running again, and running possibly against Anthony Weiner, who is a strong Hillary Clinton person. So this furthers the divide that has been talked about, at least, between Clinton people and Kennedy people. So the—there are pitfalls here.

Here’s their problem: They don’t want to seem to be campaigning because Governor Paterson keeps his own counsel. They don’t want to offend him by seeming to be too overt. So for her to go out, hold a news conference, speak more publicly other than on street corners, you know, in Harlem, for instance, when she was with Al Sharpton, would seem to be campaigning too overtly. So that’s what they are trying to do, and not only protect her but not seem to be campaigning rigorously for this.

And then, of course, there’s Andrew Cuomo.

MR. GREGORY: Right.

MS. MITCHELL: And the Cuomo supporters are leaking things. I mean, there are tabloid reports that she didn’t vote in past elections, that she wasn’t always registered in New York. When she was a student at Harvard, she was registered in Massachusetts, as you would expect. So there’s going to be, I mean, this is New York politics.

MR. GREGORY: Right.

MS. MITCHELL: And Cuomo is already saying privately that he regrets that he was not more aggressive in going after this.

MR. GREGORY: It’s interesting, this question of—from some critics, about a sense of entitlement. Charles Krauthammer wrote about this in his column in The Washington Post. He writes, “No lords or ladies here. If Princess Caroline wants a seat in the Senate, let her do it by election. There’s one in 2010. To do it now by appointment on the basis of bloodline is an offense to the most minimal republicanism. Every state in the union is entitled to representation in the Senate. Camelot is not a state.” Michele:

MS. NORRIS: Hm. You know, both, when we’re talking about New York and Illinois, both of these stories seem to energize the GOP. It’s interesting because they really do sort of get them going.

MS. MARIN: Right.

MS. NORRIS: One of the things this story shows is that politics has become a family business.

MR. GREGORY: Mm-hmm.

MS. NORRIS: I mean, think about all the characters here: Andrew Cuomo, son of the governor; Caroline Kennedy, daughter of a, a former president; and Governor Paterson, whose father, Basil Paterson, has long been involved in politics. If she wants this seat, she’s going to have to run for it, and she’s going to face the kind of criticism that she’s never faced before. One of the questions I have that is interesting is, “Where are the Clintons on this?” Another dynastic family.

MR. GREGORY: Right.

MS. NORRIS: And where Hillary Clinton is in this and how much she will help her by running interference or by, behind the scenes, trying to prepare her for this.

MR. GREGORY: Back people up.

But, you know, Erin, what’s interesting, with so much focus on bloodline and family ties, what about money? People don’t pay as much attention to the...

MR. GREGORY: ...some people who are in the Senate because they were able to put a lot of money behind their own efforts.

MS. BURNETT: Oh, it’s true. And that’s one of the, the—on Wall Street everyone’s talking about this. You look at Jon Corzine, when he got his seat, or people talk about Mayor Bloomberg and what—now they look at this and say, well, it’s the same. You can either pay for it or get it through your family. You know, that’s the joke they actually make about Blagojevich. They say, “Well, really, what did he do that’s all that different from anyone else?” And obviously it’s a joke. But there is a little point there to your point...

MS. MARIN: The answer is, he raised...

MS. BURNETT: ...to your point about it’s money and family.

MS. MARIN: He raised $52 million across two gubernatorial campaigns. It was money.

MS. MITCHELL: But the bottom line is that these are, to Charles Krauthammer’s point, sorry, but this is an appointed process...

MR. GREGORY: Right.

MS. MITCHELL: ...in both Illinois and in New York. You can say that it smacks of being anti-democratic, small d, but that is the way the law is. That’s the, the way the Constitution is. It’s the 17th amendment to the Constitution.

MS. NORRIS: But it is going to require someone who does have a lot of intestinal fortitude, because...

MR. GREGORY: And it is interesting that even her—one of her big backers, Mayor Bloomberg, did suggest that that appointment process should actually be changed going forward.

I want to stay in New York and something else that has rocked Wall Street beyond the economy, and that is Bernard Madoff. Big money man, investment man who was the darling of Wall Street for many, many years. Now it turns out he ran a giant Ponzi scheme and billions have been lost, from the small investor to, to Jewish organizations and, and philanthropies across the country. Steve Pearlstein, who writes about the economy for The Washington Post, wrote this: “With the Madoff story, it is now revealed that the masters of the universe aren’t just too clever by half—they’re not that clever at all. For years, they not only allowed themselves to be bamboozled by a con artist but also willingly and enthusiastically served as his market agent, offering friends, relatives and favorite charities the opportunity to invest with their good pal, Bernie Madoff. (So much for the idea that wealthy individuals and ‘sophisticated’ institutional investors don’t need the protection of government regulators.)” Was anybody watching?

MS. BURNETT: It, it is incredible, because there had been credible complaints brought to the SEC that said along the lines of, “This is too good to be true. You don’t get these sorts of consistent returns.”

MR. GREGORY: Mm-hmm.

MS. BURNETT: And they didn’t do anything about it. But they’re—you know, I was talking to Mort Zuckerman, the New York real estate man, earlier this week, and he had lost $30 million in one of his charities that was invested with Bernie Madoff. And he said, “I didn’t even know who the guy was. I had given my money to somebody else who actually”...

MR. GREGORY: Right.

MS. BURNETT: ...”entrusted the entire $30 million to one guy, a guy I’d never heard of, and then I get a letter finding out that it’s completely gone.” So you’re talking about some very sophisticated people who were completely duped, and maybe some of them should have been doing more due diligence. Some of them were trusting that role to others...

MR. GREGORY: Right.

MS. BURNETT: ...who had a fiduciary responsibility to do it. But there’s no question we need a real regulator.

MR. GREGORY: And here John McCain was lampooned a bit during the—for the campaign for saying that SEC Chairman Christopher Cox should be fired.

MS. MITCHELL: Well, and, in fact, you have people who invest in these fund of funds...

MS. MITCHELL: ...and these are supposed to be the people who do all the due diligence beyond the regulators, and they were looking to put all of this money in a nondiversified way into a fund which had a teeny two-person or three-person accounting and....

MR. GREGORY: Mm-hmm.

MS. MITCHELL: ...and no computerized analysis?

MS. BURNETT: And collect a fee for doing it.

MS. MITCHELL: And collect the fee.

MS. BURNETT: Yeah.

MS. MITCHELL: Exactly. So the SEC has a lot of answering to do.

MR. GREGORY: Right.

MS. MITCHELL: And, and, in fact, John McCain was absolutely right in looking at that. But the, the—it’s not just this SEC, it’s previous SEC chairmen. It’s not just Christopher Cox, it go—this goes all the way back...

MR. GREGORY: I, I’ve got just a couple minutes left. I want to take a look at the Obama Cabinet now that it is complete. And we have a picture of the Cabinet that we can show, from Eric Holder to Tom Vilsack and on and on. The Cabinet now set with historic levels of diversity and ideological distinction. This is how The Washington Post reported on it, for the Obama Cabinet, “A Team of Moderates.”

Carol, what have we learned about Barack Obama in the selection of his Cabinet?

MS. MARIN: That he—the word still is pragmatic. That he believes in consensus. It is this no drama. It’s a team of people who are going to move methodically, without ideological components. In—I think ultimately what will be asked as we go forward is, is ideology all that bad? Is pragmatism always all that good? I mean, this will be, I think, the test for this Cabinet.

MR. GREGORY: Michele.

MS. NORRIS: I think you see someone who believes in the culture of argument. You see he appointed a lot of people who don’t necessarily agree with some of the stands that he took during the campaign.

MR. GREGORY: Right.

MS. NORRIS: I agree that that’s a combustible combination, because either that works well and you, you hammer it out and you develop solid policy, or you, you are stagnant, you don’t get anything done. You also see in that Cabinet something interesting, an administration that appears to pay a lot of attention to the West. I don’t think we’ve ever seen so many candidates who come out of the West, with Salazar...

MR. GREGORY: A new area of Democratic electoral strength.

MS. NORRIS: ...Napolitano, Richardson.

MS. MITCHELL: You know, it’s also a meritocracy. These are superstars, not afraid of strong personalities—Larry Summers inside the White House—but people with so much brain power and so much education, and a combination of, of talents here. And maybe it’s combustible, but it’s clear from people who have been to briefings with him that he listens carefully, but he’s also very decisive...

MS. MITCHELL: ...and he knows what he wants. I—it’s going to be very interesting, though, to see whether this economic team is going to move toward what looks more and more like an industrial policy, which is antithetical to everything they’ve always stood for in the past.

MS. MARIN: But it looks like...

MS. MITCHELL: And how are they going to moderate that?

MR. GREGORY: Just about 15 seconds, Erin. Any thoughts on this?

MS. BURNETT: Look, I think it’s—really comes down to this whole issue of labor. It’s all about jobs and labor. And there’s a crucial appointment in there when you look at Ron Kirk, pro-NAFTA, pro-China and the World Trade Organization...

MR. GREGORY: Right.

MS. BURNETT: ...this stands to my point, which is it all comes down to labor. And maybe he’s going to take a stronger stance than we think.

MR. GREGORY: All right, thank you all. We’re going to leave it there. But we’ll continue our discussion with our roundtable and ask them some rapid-fire predictions for the new year in our MEET THE PRESS Take Two Web extra. It’s on our Web site this afternoon at mtp.msnbc.com. We’ll be right back.

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We’ll be back next week. Happy Hanukkah and Merry Christmas. If it’s Sunday, it’s MEET THE PRESS.